New York Regulators Sign Off on Oct. 4 Licensing Launch During Contentious Hearing

New York regulators formally signed off Tuesday on opening the next round of both recreational and medical marijuana business licensing on Oct. 4, with hopes the move could lead to much-needed market progress.

Starting that date, New York regulators will begin taking business license applications for cultivators, processors, distributors, microbusinesses, and retailers, with even more licenses open for applications in the near future. Though it’s unclear how many permits in total the state will issue, regulators have a goal of giving 50% of permits to eligible social equity candidates.

The initial application window for recreational licenses will be open for 60 days, and some retailers that already have locations secured may be fast-tracked to licensure, said Chris Alexander, the executive director of the Office of Cannabis Management.

In the meantime, however, the state’s adult-use cannabis market remains in neutral due to a court order preventing the OCM from further processing or awarding conditional adult use retail dispensary licenses. That means, for now, New York is stuck with just 23 legal cannabis shops, even though 463 CAURD permits have been awarded.

The Cannabis Control Board also on Tuesday adopted final recreational marijuana industry regulations, approved a new license category for researchers, gave the thumbs up to a new testing lab, and approved a change in ownership for Etain, one of the state’s 11 so-called “registered organizations,” the vertically integrated businesses licensed to deal in medical marijuana.

New York-based cannabis attorney Michelle Bodian, a partner at Vicente LLP, called Tuesday’s meeting “pretty huge,” and said it’s formally throwing the gate open to the New York marijuana market.

“This is the first time it’s open application season,” Bodian said. “This seems to be the moment we’ve been waiting for, for New York to open up.”

MSOs Early Entrance

The newly adopted adult-use regulations – which were first released in May – also leave in place a controversial change in course from initial rule drafts, which at first required the 11 medical marijuana companies – most of which are large multistate operators – to wait a full three years after the official recreational market launch before they would be allowed to participate.

That timeline was rolled back to just 12 months in the revised regulations issued in May, and the CCB kept that plan in place with the rules adopted on Tuesday.

That raised the hackles of many licensed small farmers and CAURD retailers, who warned that the 11 R.O.’s would quickly dominate the supply chain.

Several farmers warned that they wouldn’t be able to compete with the R.O.’s, since the bigger companies are allowed 100,000 square feet of indoor cultivation canopy space and as many harvests a year as they can cycle through, while the state’s smaller outdoor farmers haven’t yet been permitted to transition to greenhouses, let alone full-fledged indoor cultivation.

And the small farms as a whole also still have hundreds of thousands of pounds of cannabis from last year left to sell.

Emotions Run High

“This is completely B.S.,” said Mike Casacci, co-owner of House of Sacci, a small licensed farm. “You told us they would have to wait three years before they came into this market.”

Casacci also blasted the CCB for approving the change of ownership for Etain, and said the board approved a takeover by Scotts Miracle-Gro.

“New Yorkers do not want the makers of Roundup growing their weed,” Casacci said, referring to a controversial pesticide distributed by Scotts. He also pledged that he wouldn’t sell any of his cannabis to stores owned by the 11 R.O.’s.

Casacci and several other farmers said they’d spent everything their families had investing in the New York cannabis opportunity with the understanding that they’d have a multiyear head start on the larger operators that have been eager to tap the New York market. One farmer even said she’d become suicidal.

“We relied on you,” said Jeanette Miller, a founder of the Cannabis Farmers Alliance who said she still has “500-plus pounds (of cannabis) sitting and rotting right now” because there aren’t enough retailers to handle the backlog of marijuana.

“I wore a noose around my neck today because I feel like I’m going to hang myself,” Miller said, and admitted that another small farmer friend had recently called the police out of fear that Miller was going to take her own life.

Several CAURD licensees who are also stuck in limbo due to the preliminary injunction told the CCB their business ventures are also poised to collapse because they don’t have the funds to keep treading water.

“There’s a real risk that CAURD and all of us who followed the rules … will potentially be ruined,” one CAURD licensee told the board. “Many of us gave up other real opportunities … to pursue a framework that has been halted through no fault of our own.”

Other stakeholders, however, expressed delight that the CCB was moving forward with the October licensing, despite the other market challenges in New York.

“The rules passed today are a step forward. But until the state actually issues these licenses and these dispensaries get open and operational, New Yorkers will continue to be denied the tax revenue, safe cannabis, and equitable system they were promised,” said Reverend Kirsten John Foy, a spokesman for the Coalition for Access to Safe and Regulated Cannabis, a group that includes New York R.O.’s Acreage Holdings, Curaleaf, Green Thumb Industries, and PharmaCann.

“Allowing the businesses that have built New York’s medical market to enter the adult-use industry would help close that gap,” Foy said. “But since these medical operators can only open a maximum of 33 dispensaries, OCM still must act expeditiously and efficiently to legally open the thousands of additional dispensaries it claims the state needs.”

The New York Medical Cannabis Industry Association – a trade group representing most of the 11 R.O.’s – also said it “applauds” the regulations.

“Today marks a pivotal step toward expanding and sustaining the state’s medical program and creation of an economically viable and equitable adult-use cannabis industry in New York,” the NYMCIA said in a statement. “Once up and running, this market will help squeeze out illicit operators putting consumers at risk, provide growers with more opportunities to sell their products, and generate tax revenue for communities disproportionately impacted by the cannabis prohibition.”

But the Cannabis Association of New York – which represents small farmers and other mid-sized businesses – said Tuesday’s CCB meeting “opened the door for big cannabis to come in and compete.”

CANY called upon marijuana regulators and the legislature to enact three specific policy reforms to help small businesses:

Alter the state’s potency-based cannabis tax structure
Give small businesses equal canopy space to the R.O.’s
Prioritize a crackdown on the illicit market.

Market Update

During the Tuesday CCB meeting, OCM staff also delivered New York’s most recent marijuana statistics on sales and recently launched farmers markets.

By the end of August, New York’s 23 legal cannabis shops sold a total of $70 million in marijuana goods, according to an OCM press release. Sales shot up in July to $16.8 million before hitting a high of $17.6 million in August, OCM Policy Director John Kagia reported.

“This summer has shown us the scale of demand that lies ahead,” Kagia said.

Bolstering that have been 22 farmers markets – known formally as growers showcases – that have begun all over New York, said OCM staffer Ben Sheridan. More than 70 cannabis farmers, 19 processors, and 15 CAURD retailers have participated in the farmers markets, Sheridan said. And sales have averaged about $10,000 a day, which he said could double in September.

The OCM currently estimates that farmers markets will sell $12.5 million in cannabis by the end of the year, but Sheridan said they’re optimistic sales will be much higher than that.

“This has the power … to grow exponentially,” Sheridan said of the growers showcase model.

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